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Job XX has completed at a total production cost of $3,633. Administration and selling overheads are applied at 20% of production cost. The selling price of each job is established so as to provide a GROSS profit margin of 30%.
What is the selling price of job XX?
(a) $4,723
(b) $5,190
(c) $5,668
(d) $6,228
By solving this question my answer is option c
but correct answer is option b.Direct costs = 3633 (admin and selling costs are nothing to do with gross profit margins)
If the gross margin is 30%, this means that Profit is 30% of selling price so the relationship between cost, profit and selling price is:
Cost + Profit = Selling price
70% 30% 100%So, to go from cost (70%) to selling price (100%) you need to multiply the cost by 100/70.
3633 x 100/70 = 5,190
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